Understanding Why the AI Boom Isn’t Over Yet
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The Current Landscape of AI Investments
While the excitement around AI might seem to be diminishing, the sector continues to be remarkably promising, showcasing long-term growth prospects that can unveil intriguing investment opportunities.
Prominent players like Nvidia dominate the scene, yet smaller emerging companies could also present considerable growth potential.
Navigating the vast AI landscape requires careful attention to key signs of innovation and market movements.
Market Outlook for AI
The recent market correction, followed by a swift “V-shaped” recovery, has introduced substantial uncertainty and volatility, particularly in tech stocks.
Stocks associated with artificial intelligence have notably felt this pressure.
Even as tech profits slow and the initial frenzy for AI appears to wane, long-term forecasts remain bright.
A recent IDC report predicts that global spending on AI is expected to grow at nearly 30% annually, reaching an impressive $632 billion by 2028.
This surge is fueled by increased demand across advertising, gaming, and emerging technologies.
Potential Gold Nuggets in the Tech Sector
Despite the current volatility, exploring investment opportunities in AI firms outside the traditional tech giants may still yield fruitful results.
However, it remains challenging to distinguish which companies could follow in Nvidia’s footsteps and which may be unsustainable bubbles.
A practical starting point would be to delve into the technology-focused investment fund market.
Among these, the iShares Expanded Tech-Software Sector ETF (IGV) has been gaining traction.
Understanding IGV ETF
The IGV ETF seeks to replicate the performance of the S&P North American Expanded Technology Software Index, investing in firms operating in software and related services, particularly those emphasizing advanced technologies, including AI.
Major holdings include tech giants like Adobe Inc., but there are also smaller firms worthy of consideration, potentially housing the “gold nugget” many investors are currently searching for.
Highlighting an AI Company within the ETF
Among the various entities included in the fund is Smartsheet Inc., a company focused on collaborative work management and productivity software.
Smartsheet’s platform enables businesses to plan, track, automate, and report work more effectively.
Despite being relatively smaller than the industry giants, Smartsheet has reported a positive performance of 25% in 2024.
The company’s revenues have increased by 22.35% year-over-year, while its profit margin is gradually approaching breakeven, currently near -8%.
With a market capitalization of approximately $6.88 billion, compared to Adobe’s over $200 billion, investing in Smartsheet carries certain risks yet demonstrates the potential for strategic stock picking starting from an ETF.
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